State demands cash from O.C. cities

Dec. 20, 2012

Updated Aug. 21, 2013 1:17 p.m.

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This building in theTina Pacific area is being leased by the Illumination Foundation from the city of Stanton for a dollar a year to use as temporary housing for the homeless. MARK EADES, THE ORANGE COUNTY REGISTER

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The city of Stanton is looking for was to improve the area of Pacific and Tina Street. The area was declared as blighted under the Redevelopment Act. The city has puchased more than half the properties and torn them down. ROSE PALMISANO, THE ORANGE COUNTY REGISTER

This building in theTina Pacific area is being leased by the Illumination Foundation from the city of Stanton for a dollar a year to use as temporary housing for the homeless. MARK EADES, THE ORANGE COUNTY REGISTER

City/county

Amount

Response

Anaheim

$13.9 million

City already

paid the full amount

*Brea

$8 million

N/A

Buena Park

$4.6 million

City already

paid the full amount

Costa Mesa

$2.4 million

City says

it's going to pay

*Cypress

$2.6 million

N/A

*Fountain Valley

$12.5 million

N/A

*Fullerton

$7.7 million

N/A

*Garden Grove

$4.2 million

N/A

Huntington Beach

$31.1 million

City says it can't pay;

has filed an appeal

with the state

*La Palma

$3.1 million

N/A

Lake Forest

$4 million

City says its going to pay

Mission Viejo

$5.4 million

City says it owes nothing

Orange

$19.6 million

Paid $12 million,

contesting the rest

Orange County

$50 million

County says it owes

$20.4 million;

negotiating with state

*San Juan

Capistrano

$5.8 million

N/A

Santa Ana

$56 million

City Council discussing

demand letter today

Seal Beach

$1 million

City convinced the state

to let it keep the money

Stanton

$1.4 million

City Council discussing

demand letter today

Tustin

$14.3 million

City Council doesn't plan

to address until

next meeting, Jan. 15

Westminster

$16 million

City paid all but

$35,000,

which it is contesting

*As of press time, the response of these cities was unknown

The state Department of Finance has demanded in recent weeks that 19 Orange County cities and the county itself turn over a combined $263 million in unused funds previously earmarked for low- and moderate-income housing.

Some cities have already paid up, including Anaheim and Buena Park, which, according to the state, had unused funds of $13.9 million and $4.6 million, respectively. Others are fighting the demand, saying the state's calculations are wrong. Officials in at least two cities still are trying to figure out what to do.

"I think we're going to seek an injunction against the state to stop this," said Dave Shawver, mayor of Stanton, which was told by the state in November that it had to cough up $1.4 million in unused funds.

The city councils in Stanton and Santa Ana are holding meetings today to discuss their responses to the state's demand. The state says Santa Ana owes more than $56 million in unused low- and moderate-income housing funds. Santa Ana city officials declined to comment until the meeting.

The state says the cities and the county must turn over this money in the wake of last year's dissolution of California's 400 redevelopment agencies, which were required to set aside property tax revenue for low- and moderate-income housing. Under the law, these unused funds would not go to the state, but rather be redirected to schools, cities, counties and special districts.

The state Department of Finance says it is merely enforcing the law. State finances will not directly benefit from these funds, although as more of this money goes to schools, the less the state has to provide them out of the General Fund to meet the Proposition 98 minimum school-funding guarantee.

If the cities and the county do not pay, they could see their sales or property tax revenue withheld by the state, or officials could even face criminal penalties for willfully disregarding the law. But Department of Finance officials say initially they will be trying to work with local governments to avoid any punitive actions.

For weeks this fall, department officials corresponded with city and county representatives all across the state about their unused low- and moderate-income housing funds. Some cities didn't challenge the department's calculations and turned over the money. That's what Garden Grove did when it received a letter demanding $4.2 million.

"We did not contest their calculation," said Matt Fertal, Garden Grove city manager.

Others cities appealed the state's figures. Recently, the department mailed out revised figures to cities that had appealed.

The cities had five days to turn over the money when they received the revised calculations. The deadline was Thursday for six Orange County cities, including Anaheim, Buena Park, Orange, Santa Ana and Tustin.

The state says the city of Orange owes $19.6 million. It paid $12 million in November, said Rick Otto, Orange's assistant city manager, but is contesting repayment of the remainder of the funds. The city already spent $7.1 million to fund a portion of the cost for a 63-unit housing development in northern Orange that the state contends did not meet guidelines of low-income housing, he said.

The Tustin City Council does not plan to address this issue until the next regular council meeting, on Jan. 15.

Five additional cities had due dates earlier in the month. The rest were supposed to turn over their funds in November, although some have not, including the County of Orange.

The county had until Nov. 19 to turn over $50 million in unused low- and moderate-income housing funds. The county, however, believes that the Department of Finance made a technical error by double-counting some of the county's funds, said Julia Bidwell, deputy director of OC Community Resources.

The county believes the correct amount due to taxing entities is about $20.4 million. The county has provided additional documentation to the Department of Finance and expects a response as soon as today, Bidwell said.

In Seal Beach, meanwhile, officials say they convinced the state to drop its $1 million demand of the city. Seal Beach officials traveled to Sacramento and lobbied hard to keep the money, which will now be available to subsidize Seal Beach Shores mobile home park, where 25 of the 125 spaces qualify for low-income and rental subsidies, said city Finance Director Victoria Beatley.

"The staff of the city of Seal Beach has been working very diligently to keep the funds for Seal Beach Shores as an enforceable allocation," Beatley said. "They reversed their decision. And they do see the program is an allowable obligation," she said.

Huntington Beach had until Dec. 12 to turn over $31.1 million, but Assistant City Manager Bob Hall said he believes the state made an error in its calculations. The city has filed an appeal with the Department of Finance to contest the demand.

"The city does not have $31 million in housing funds and cannot plan to pay that amount," Hall said.

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